Question 1

An individual is MOST likely to be a free rider when a good is:

Accepted Answer

A)  private. 
B)  nonexcludable. 
C)  nonrival. 
D)  artificially scarce. 
A)  private. 
B)  nonexcludable. 
C)  nonrival. 
D)  artificially scarce.

Question 2

Josh has an iPhone,and he frequently downloads songs from iTunes.He pays a small price for each download,but downloading a song does not remove it from the iTunes inventory,which is available for other buyers.The iTunes service is BEST described as a(n):

Accepted Answer

A)  private good. 
B)  public good. 
C)  artificially scarce good. 
D)  common resource. 
A)  private good. 
B)  public good. 
C)  artificially scarce good. 
D)  common resource.

Question 3

Use the following to answer questions :
Figure: Market Failure  
-(Figure: Market Failure)Use Figure: Market Failure.Suppose that the supply curve represents the marginal cost of providing streetlights in a neighbourhood where only two people,Ann and Joe,reside.The demand curve represents the marginal benefit that Ann receives from the streetlights.Suppose that Joe's marginal benefit from the streetlights is a constant amount equal to the vertical distance A-C.How much is Ann willing to pay for E streetlights?

Accepted Answer

A)  0 
B)  A 
C)  B 
D)  C 
A)  0 
B)  A 
C)  B 
D)  C

Question 4

Use the following to answer questions :
Figure: An Individual's Marginal Benefit from a Public Good  
-(Figure: An Individual's Marginal Benefit from a Public Good)Use Figure: An Individual's Marginal Benefit from a Public Good.Assume that two individuals will share consumption of a public good;each individual has the marginal benefit curve shown in the figure.What is the marginal social benefit from four units of the public good?

Accepted Answer

A)  $0 
B)  $8 
C)  $16 
D)  $32 
A)  $0 
B)  $8 
C)  $16 
D)  $32

Question 5

A good that is nonexcludable but rival in consumption is a _____ good.

Accepted Answer

A)  common resource 
B)  private 
C)  public 
D)  normal 
A)  common resource 
B)  private 
C)  public 
D)  normal

Question 6

Use the following to answer question 121:
Figure: Model of a Market for a Common Resource  
-(Figure: Model of a Market for a Common Resource)Use Figure: Model of a Market for a Common Resource.The figure shows the intersection of the private supply and demand curves.Without any consideration of the marginal social cost of using a common resource,the quantity of the common resource used at Q will be:

Accepted Answer

A)  larger than is socially desirable. 
B)  smaller than is socially desirable. 
C)  efficient. 
D)  indeterminate without more information. 
A)  larger than is socially desirable. 
B)  smaller than is socially desirable. 
C)  efficient. 
D)  indeterminate without more information.

Question 7

Use the following to answer questions :
Figure: An Individual's Marginal Benefit from a Public Good  
-(Figure: An Individual's Marginal Benefit from a Public Good)Use Figure: An Individual's Marginal Benefit from a Public Good.Assume that two individuals will share consumption of a public good;each individual has the marginal benefit curve shown in the figure.What is the total social benefit from four units of the public good?

Accepted Answer

A)  $16 
B)  $60 
C)  $140 
D)  $200 
A)  $16 
B)  $60 
C)  $140 
D)  $200

Question 8

A very large museum could accommodate many more visitors than it does without reducing the enjoyment of the visitors if it did not charge such a high price for admission.Visits to the museum are a(n):

Accepted Answer

A)  private good. 
B)  public good. 
C)  common resource. 
D)  artificially scarce good. 
A)  private good. 
B)  public good. 
C)  common resource. 
D)  artificially scarce good.

Question 9

For a public good,nonpayers _____ excluded from obtaining the benefits of the good.

Accepted Answer

A)  can be 
B)  are automatically 
C)  usually are 
D)  cannot be 
A)  can be 
B)  are automatically 
C)  usually are 
D)  cannot be

Question 10

When a good is nonrival in consumption,its MOST efficient price is:

Accepted Answer

A)  zero. 
B)  determined by producers. 
C)  greater than zero. 
D)  equal to the market price of a similar rival good. 
A)  zero. 
B)  determined by producers. 
C)  greater than zero. 
D)  equal to the market price of a similar rival good.

Question 11

Use the following to answer questions :
Scenario: Ben and Nik
Ben and Nik are the only members of a community.They have revealed the marginal private benefits they each receive from a public good whose marginal social benefit is known.In addition,the marginal social cost (MSC)of the public good is known and is constant.  
-(Scenario: Ben and Nik)Use Scenario: Ben and Nik.At all levels of provision of the public good:

Accepted Answer

A)  Ben places a higher value on the public good than Nik. 
B)  the MSC is less than the MSB. 
C)  the optimal level is not attained. 
D)  the private marginal benefits cannot be determined. 
A)  Ben places a higher value on the public good than Nik. 
B)  the MSC is less than the MSB. 
C)  the optimal level is not attained. 
D)  the private marginal benefits cannot be determined.

Question 12

Common resources tend to be overused because:

Accepted Answer

A)  individuals tend to ignore the cost to others of their use of the resource. 
B)  the individual marginal cost is greater than the marginal social cost. 
C)  common resources are nonrival and nonexcludable. 
D)  the marginal cost of allowing one more unit of consumption is zero. 
A)  individuals tend to ignore the cost to others of their use of the resource. 
B)  the individual marginal cost is greater than the marginal social cost. 
C)  common resources are nonrival and nonexcludable. 
D)  the marginal cost of allowing one more unit of consumption is zero.

Question 13

Pharmaceutical companies typically face very high fixed costs when developing new drugs.The marginal cost of producing a drug after development is very low.When these companies set price and output to maximize profit,patients pay a _____ price for _____ amounts of the drug than are socially optimal.

Accepted Answer

A)  lower;lower 
B)  higher;higher 
C)  lower;higher 
D)  higher;lower 
A)  lower;lower 
B)  higher;higher 
C)  lower;higher 
D)  higher;lower

Question 14

Suppose that the town of Falls Valley has a mosquito problem.After a bad summer,the town accountants explain that the marginal cost of providing one more treatment for mosquito control is $100 000.The town should provide the additional mosquito control only if the marginal:

Accepted Answer

A)  benefit for any individual citizen is at least $100 000. 
B)  benefits for all individual citizens add up to at least $100 000. 
C)  social cost of mosquito control is more than $100 000. 
D)  social cost of mosquito control is less than $100 000. 
A)  benefit for any individual citizen is at least $100 000. 
B)  benefits for all individual citizens add up to at least $100 000. 
C)  social cost of mosquito control is more than $100 000. 
D)  social cost of mosquito control is less than $100 000.

Question 15

Consumption of a common resource is inefficiently too _____ because the marginal social cost of the resource is _____ than the private marginal cost.

Accepted Answer

A)  low;higher 
B)  low;less 
C)  high;higher 
D)  high;less 
A)  low;higher 
B)  low;less 
C)  high;higher 
D)  high;less

Question 16

Which statement is TRUE?

Accepted Answer

A)  It is possible to observe how much people benefit from consuming an additional unit of a public good. 
B)  It is difficult to get an accurate estimate of the marginal social benefits of public goods because individuals have an incentive to distort the truth about their willingness to pay. 
C)  Individuals tend to underestimate the amount of a public good that they desire. 
D)  It is straightforward to estimate the marginal social benefits of public goods. 
A)  It is possible to observe how much people benefit from consuming an additional unit of a public good. 
B)  It is difficult to get an accurate estimate of the marginal social benefits of public goods because individuals have an incentive to distort the truth about their willingness to pay. 
C)  Individuals tend to underestimate the amount of a public good that they desire. 
D)  It is straightforward to estimate the marginal social benefits of public goods.

Question 17

Most neighbourhood streets are illuminated at night by streetlights.The streetlights are _____ and _____.Therefore,they are likely to be _____ by the competitive market.

Accepted Answer

A)  nonrival;nonexcludable;underprovided 
B)  nonrival;nonexcludable;overprovided 
C)  rival;excludable;efficiently provided 
D)  nonrival;excludable;underprovided 
A)  nonrival;nonexcludable;underprovided 
B)  nonrival;nonexcludable;overprovided 
C)  rival;excludable;efficiently provided 
D)  nonrival;excludable;underprovided

Question 18

Use the following to answer questions : $\text {Table: Marginal Benefit, Cost, }$
$\text {and Consumer Surplus}$
$\begin{array}{l} 
\begin{array}{lr}
\hline&\text { Individual }\\text { Consumer } & \text { Marginal Benefit } \
\hline \text { Adriana } & \$ 2 \
\text { Bhagesh } & 15 \
\text { Chizuko } & 1 \
\text { Denzel } & 10 \
\text { Emma } & 5 \
\text { Frank } & 4
\end{array}
\end{array}$

-(Table: Marginal Benefit,Cost,and Consumer Surplus)Use Table: Marginal Benefit,Cost,and Consumer Surplus.The table shows six consumers' willingness to pay for one iTunes download.If the marginal social cost is constant at _____,then _____ consumers will purchase this good,and consumer surplus is _____.

Accepted Answer

A)  $6;three;$13 
B)  $3.50;four;$20 
C)  $11;two;$22 
D)  $40;zero;-$37 
A)  $6;three;$13 
B)  $3.50;four;$20 
C)  $11;two;$22 
D)  $40;zero;-$37

Question 19

Use the following to answer questions :
Figure: Market Failure  
-(Figure: Market Failure)Use Figure: Market Failure.In the figure,if production in this competitive market is at quantity E:

Accepted Answer

A)  marginal benefit is equal to marginal cost. 
B)  marginal benefit is less than marginal cost. 
C)  marginal benefit is greater than marginal cost. 
D)  price is equal to marginal cost and greater than marginal benefit. 
A)  marginal benefit is equal to marginal cost. 
B)  marginal benefit is less than marginal cost. 
C)  marginal benefit is greater than marginal cost. 
D)  price is equal to marginal cost and greater than marginal benefit.

Question 20

Use the following to answer questions :
Figure: An Individual's Marginal Benefit from a Public Good  
-(Figure: An Individual's Marginal Benefit from a Public Good)Use Figure: An Individual's Marginal Benefit from a Public Good.Assume that two individuals will share consumption of a public good;each individual has the marginal benefit curve shown in the figure.If the marginal cost of the good is $8,how many units of the public good will be provided by the private market?

Accepted Answer

A)  0 
B)  8 
C)  12 
D)  16 
A)  0 
B)  8 
C)  12 
D)  16

An individual is MOST likely to be a free rider when a good is:

Josh has an iPhone,and he frequently downloads songs from iTunes.He pays a small price for each download,but downloading a song does not remove it from the iTunes inventory,which is available for other buyers.The iTunes service is BEST described as a(n):

A good that is nonexcludable but rival in consumption is a _____ good.

A very large museum could accommodate many more visitors than it does without reducing the enjoyment of the visitors if it did not charge such a high price for admission.Visits to the museum are a(n):

For a public good,nonpayers _____ excluded from obtaining the benefits of the good.

When a good is nonrival in consumption,its MOST efficient price is:

Common resources tend to be overused because:

Pharmaceutical companies typically face very high fixed costs when developing new drugs.The marginal cost of producing a drug after development is very low.When these companies set price and output to maximize profit,patients pay a _ price for _ amounts of the drug than are socially optimal.

Suppose that the town of Falls Valley has a mosquito problem.After a bad summer,the town accountants explain that the marginal cost of providing one more treatment for mosquito control is $100 000.The town should provide the additional mosquito control only if the marginal:

Consumption of a common resource is inefficiently too _ because the marginal social cost of the resource is _ than the private marginal cost.

Which statement is TRUE?

Most neighbourhood streets are illuminated at night by streetlights.The streetlights are ___ and _.Therefore,they are likely to be ___ by the competitive market.

Use the following to answer questions : Figure: Market Failure -(Figure: Market Failure)Use Figure: Market Failure.In the figure,if production in this competitive market is at quantity E:

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition

Externalities

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters

Exam 17: Public Goods and Common Resources

An individual is MOST likely to be a free rider when a good is:

Josh has an iPhone,and he frequently downloads songs from iTunes.He pays a small price for each download,but downloading a song does not remove it from the iTunes inventory,which is available for other buyers.The iTunes service is BEST described as a(n):

A good that is nonexcludable but rival in consumption is a _____ good.

A very large museum could accommodate many more visitors than it does without reducing the enjoyment of the visitors if it did not charge such a high price for admission.Visits to the museum are a(n):

For a public good,nonpayers _____ excluded from obtaining the benefits of the good.

When a good is nonrival in consumption,its MOST efficient price is:

Common resources tend to be overused because:

Suppose that the town of Falls Valley has a mosquito problem.After a bad summer,the town accountants explain that the marginal cost of providing one more treatment for mosquito control is $100 000.The town should provide the additional mosquito control only if the marginal:

Consumption of a common resource is inefficiently too _____ because the marginal social cost of the resource is _____ than the private marginal cost.

Which statement is TRUE?

Most neighbourhood streets are illuminated at night by streetlights.The streetlights are _____ and _____.Therefore,they are likely to be _____ by the competitive market.

Use the following to answer questions : Figure: Market Failure -(Figure: Market Failure)Use Figure: Market Failure.In the figure,if production in this competitive market is at quantity E:

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition

Externalities

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters

Consumption of a common resource is inefficiently too _ because the marginal social cost of the resource is _ than the private marginal cost.

Most neighbourhood streets are illuminated at night by streetlights.The streetlights are ___ and _.Therefore,they are likely to be ___ by the competitive market.